The Part 1 application for historic preservation tax credits
SECOND IN A SERIES
By Bob Graham, Motley Design Group
So you want a 20% tax credit for rehabbing a historic building? You won’t get past square one if you can’t prove your building has historic cred.
In my prior post, “Historic Preservation Tax Credits: Worth the trouble if you know how to get them,” I gave an overview of the federal Historic Preservation Investment Tax Credit (ITC) and when it may be an appropriate tool for enhancing the financial package for a renovation project. In this article I will review the first step in the three-step process by which a project achieves status as a “certified rehabilitation” and becomes eligible for the ITC.
The three steps to certification relate directly to the National Park Service (NPS) Parts 1, 2, and 3 certification forms that are filed to prove that your project qualifies for the ITC. In Part 1, you are establishing that the building you’re working on is historic. Part 2 outlines in detail what work will be performed on the building and how it meets preservation standards. Part 3 documents the finished project and requests certification.
The challenge and the strategy
Getting approval from the Parks Service for your Part 1 filing could be hard or easy, depending on the circumstances around your building. Simply stated, your building must be listed in, or eligible for, the National Register of Historic Places. That may sound onerous, but it’s really not as big a hurdle as you may think.
If you are considering applying for the historic rehabilitation ITC, presumably you either know that your building is listed as historic or you suspect that it might be eligible. I’ll go over three cases: a property that is listed in the National Register of Historic Places, either individually or as part of an historic district; a building that has been determined eligible or likely eligible to the register by a past survey; and the third case, what I would call an “unrecognized” historic building that may be eligible, but that has drifted along under the radar. Each case requires a different approach to getting your Part 1 form approved.
Like most things in life, your best approach is to make sure you have done your homework. Gain a full understanding of the history of your property and how it fits into the larger history of the place. Become an expert on these subjects, and you will have a much easier time convincing others of the historic value of your property.
It’s a good idea to bring your State Historic Preservation Office (SHPO) representative into the process as early as possible and recruit him or her as an advocate for your project. (Arizona SHPO’s page linked here.) They have an interest in seeing that your project get tax credits, because it helps to justify the value of their preservation program politically. Their role in the process is to provide the first line of review, and in effect serve as the field agent for NPS. Your initial discussions are with a SHPO representative. They will review and comment on your form submissions and construction plans, and will be the one forwarding your documents to NPS. Of particular relevance to this article, your SHPO is the best source of guidance about whether or not your building is historic, and an ITC candidate.
National-Register listed buildings
If your building is already listed, then the Part 1 form is a mere formality. All you need to know is the name of the property, the date of listing, and whether it was listed individually or as part of a group (an historic district).
Eligible buildings not yet listed
Because the National Register nomination process costs money and time, many buildings have been identified in the course of local historic surveys as being eligible to the National Register but which have never actually been nominated. In most cases, those surveys include a certain amount of historical background research that provides the context for the recommendation of eligibility. The survey usually says explicitly why a given building is recommended eligible. This initial information is a valuable head start on showing NPS that your building is eligible, but is often not definitive. In most cases, additional research will need to be completed to flesh out the details of the building’s history and the historical context under which it is considered eligible.
In order to claim your tax credits when your project is complete, your building will need to be listed in the National Register, and that will require a nomination form to be prepared. Don’t wait to get this started. The best proof to NPS that your building is historic is to be able to show them the nomination, even if it has not yet been fully reviewed or approved.
The Part 1 form documents the same types of information that would be eventually submitted for National Register listing but in brief, narrative format. It boils the question down to two short statements: a “description of physical appearance” and a “statement of significance.” If the case for eligibility is simple and strong, then just submitting the information gleaned from past studies or surveys can be enough. After the summary information has been submitted, NPS will let you know if they agree with your eligibility claim.
Sometimes NPS does not agree. Don’t take an initial rejection too seriously! In reviewing a Part 1 form they are making a judgment on very little information. Providing them a copy of your full, draft National Register nomination at that point can make a big difference.
There are many buildings around the country that are National Register material (and thus candidates for the ITC) but which have not been recognized or surveyed. Here are some of the categories of buildings that could present hidden opportunities for a rehabilitation project using the ITC.
Newer buildings: 50 years is the usual cutoff age for historic consideration. For this reason, historic surveys don’t normally consider younger buildings, and as time marches on, more and more buildings reach that magic 50 year birthday and need a fresh look. As of 2016, buildings constructed between 1956 and 1966 have only recently been old enough to be considered for their historic value – and many of these have never been evaluated.
Building types that have become rare: The conditions around which buildings are evaluated for historic status can change over time. Ordinary-seeming buildings that are old enough to qualify, but are deemed to lack importance, may be skipped over by historic surveys. Consider the case of just such an unremarkable and common old commercial building that was built in a typical downtown. If the area around it is redeveloped, tearing down so many of its neighbors that it becomes one of the last of its kind … suddenly it becomes a lot more important.
Buildings with reversible alterations: Old buildings are frequently passed over in historic surveys because they no longer represent their original architectural appearance. Some common alterations include “re-facing” a building, filling in door and window openings, or making additions to the front side. By National Register rules, if you can’t see the building’s important architectural features, they can’t contribute to its character and the building is ineligible. But what if you were to remove the covering, or open up those old window openings? That’s a different story. If you can show that enough of the original historic features are present and visible to collectively define the historic appearance of the building, it can regain eligibility.
Flawed or incomplete surveys: Historic surveys aren’t perfect. Sometimes important buildings are passed over for any number of reasons, such as incorrectly identifying the building age, or failing to uncover an important bit of data, such as who the architect was or that it was the home of an important person.
In each of these cases, proving the eligibility of an unrecognized resource will require some research and understanding of how the arcane rules of the National Register are applied. If you are not knowledgeable about the criteria then it can be difficult to tell an eligible building from an ineligible one. Fortunately, your state or local historic preservation office or a qualified preservation consultant can offer guidance.
This was the easy part
In most cases, proving that your building has the qualities necessary to be considered historic is just a matter or proper documentation. You can usually receive approval of your Part 1 form within a month or so from NPS. The real challenges are in formulating your project approach and gaining approval of your Part 2 form in the ITC process, which will be the subject of the next article of this series.